AUSTRALIA’S banking regulator is set for a major overhaul after a government-commissioned review found it had a “culture of conformity” and needed to become more forceful.

In a scathing 146-page report released Wednesday, the Australian Prudential Regulation Authority (APRA) was found to be slow to act, tentative in addressing issues that don’t entail traditional financial risks, and have a strong preference to work “behind the scenes” with the firms it oversees.

“The main conclusion of this review is that APRA’s internal culture and regulatory approach need to change,” the report said. “APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximizes its impact with regulated entities.”

Among key recommendations, the report said APRA should be given a veto power over the appointment of senior executives and directors at financial firms, and create a new division to oversee the nation’s A$2.8 trillion ($2 trillion) pension industry, with a specific focus on returns for members.

Australia’s mandatory pension savings regime has been beset by problems, from underperforming funds to the creation of 10 million unintended multiple accounts that cost savers A$2.6 billion a year in unnecessary fees and insurance.

Treasurer Josh Frydenberg said the government will take action to implement the recommendations, including considering the penalties APRA can levy, and review its pay structure to allow it to attract and retain highly skilled staff.

APRA also supports the report’s recommendations, Chairman Wayne Byres said in a statement.

“We do genuinely welcome the review,” Byres later said on a conference call with reporters Wednesday. “It does, quite fairly, make the point that we have more to do, and we need to go further and faster.”

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However, he made a veiled plea for more funding, saying the report identifies a range of areas where APRA needs to do more, “but without providing any suggestion on where it might do less.”

“We need to work with government on how we can best meet the challenge that has been laid out for us,” Byres said.

The review, headed by former competition regulator Graeme Samuel, was commissioned after an inquiry into misconduct in Australia’s financial industry unearthed a series of scandals and lashed regulators for failing to hold lawbreakers to account.

Samuel’s report echoed that sentiment, saying “an approach involving protracted behind the scenes negotiations of prudential issues is out of step with public expectations of regulators” following the Royal Commission. — Bloomberg

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